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Thursday, July 28, 2011

Gold Noise Growing Louder

Doug Casey

Yesterday the Subcommittee on Domestic Monetary Policy and Technology held another meeting, titledImpact of Monetary Policy on the Economy: A Regional Fed Perspective on Inflation, Unemployment, and QE3. Its only witness was Thomas Hoenig, the retiring president of the Federal Reserve Bank of Kansas City.Some of our readers may recall a favorable article on Hoenig by our own Doug Hornig. As Doug noted in the article, Hoenig is the closest thing to a good guy at the Fed. Hoenig was a dissident on QE2 and now opposes QE3 as well. Furthermore, he has advocated moving away from near-zero interest rates. On top of this, he has warned of the disastrous effects of prolonged low rates, which lead to bubbles and misallocations of capital.In this hearing, he testified that conditions to create a bubble are ripe in farmland and the bond market. Many of his statements are almost consistent with Austrian economics, a strong influence here at Casey Research. Hoenig notes that he has read the nearly thousand-page Austrian economics masterpiece Human Action, by Ludwig von Mises (check out his comment on Austrian economics after 1:12:00). Compared to his colleagues, Hoenig is the black sheep at the Fed.So, what can we learn from this hearing? Not much, from the actual questions and testimony. Once again, Representative Al Green (D-TX) gave his two cents on the necessity and “wisdom” of the bank bailouts. Why Green continues to discuss the bailouts almost every meeting is . . . . . . . . .